FTC Throws the Bag: Tapestry’s Capri Deal Blocked Over Market Monopoly Concerns

The United States Federal Trade Commission (FTC) has taken legal action to stop Tapestry’s $8.5 billion bid to acquire Capri, the parent company of Michael Kors. The move follows concerns that the merger could stifle competition in the lucrative handbag sector, reported Reuters.

Citing potential market domination, the FTC has argued that the proposed merger would eliminate crucial competition, depriving American consumers of benefits derived from Tapestry and Capri’s head-to-head rivalry. These benefits include competitive pricing, discounts, innovation, design, and marketing strategies, according to a statement issued by the FTC on Monday.

This legal challenge comes amid growing calls from U.S. lawmakers for heightened scrutiny of major acquisitions that could lead to increased prices and negatively impact consumers. Antitrust regulators introduced new merger guidelines in December, aiming to foster fair and competitive markets.

Tapestry had initially announced its intention to purchase Capri in August, envisioning the creation of a formidable U.S. fashion powerhouse capable of rivaling European giants like LVMH, the parent company of Louis Vuitton. The acquisition was also seen as a strategic move to gain a larger share of the global luxury market.

However, the FTC’s request for additional information in November signaled potential hurdles for the deal. Despite receiving regulatory approval from the European Union and Japan earlier in April, the FTC’s intervention in the U.S. market poses a significant obstacle to Tapestry’s expansion plans.

In response to the lawsuit, Capri Holdings expressed strong disagreement with the FTC’s decision, emphasizing the positive market dynamics that it believes the acquisition would create. Similarly, Tapestry maintained that the deal is pro-competitive and consumer-friendly, asserting that the FTC’s concerns stem from a misunderstanding of market dynamics and consumer behavior.